How Social Protest Infiltrates the Realm of Commercial Decision Making

The seminal socio-legal work of Neil Gunningham, Robert Kagan and Dorothy Thornton suggests that social activism is an important influence over firms’ inclination to comply with – and even exceed – regulatory environmental-protection requirements. They further acknowledge that corporations vary in their responsiveness to similar levels of societal pressure, and that the micro-mechanisms underlying this variation require further investigation. Similarly, a recent body of research in sociology and management investigates corporations’ responses to social protest. Yet, much of this literature investigates firms’ average or overall response to social protest, and not the variation among firms. The significance of Weber et al.’s article – From Street to Suits: How the Anti-Biotech Movement Affected German Pharmaceutical Companies– stems from its focus on micro-level analysis of firms’ varied response to social protest.

Weber et al.’s research investigates “how external contestation manifests itself in the internal polity of organizations” (ibid, 109). Their empirical focus is on German pharmaceutical companies’ decisions to invest in the development of biotechnology given an anti-genetic social-movement activism during the 1980s. In order to answer this question, the authors collected press coverage, various primary documents, interviews and secondary sources and produced in-depth portrayal of the social movement and of the responses of six leading German pharmaceutical companies.

Their overall findings and thesis is that the impact of social movement activism on firms’ commercial decisions is a function of the campaign intensity and its mediation by intra-corporate factors and processes. Thus, as a general rule, those firms that were targeted by successful activist mobilization – usually larger firms – were more likely to withdraw from (or to lower their pace of progression in) biogenetic projects. Yet, this overall impact was mediated by intra-organizational conflicts and identity as follows. First, the societal contestation of biotechnology rendered internal champions of the technology less decisive in their fight for their firms’ investment in new research and development due to their concern about damaging their corporate and individual reputations vis-à-vis external audiences.

Conversely, the risk that biotechnology created for firms’ reputations became a sword in the hands of executives and scientists who advocated investing in more traditional –non-biotechnology – pharmaceutical projects. In more diversified firms, which produced not only chemicals but also consumer healthcare products, those advocating investment in biotechnology projects faced particularly high competition from elites with alternative investment agendas.

Second, the social contestation of biotechnology generated uncertainty about its future regulation, and consequently reduced its projected value in comparison with alternative projects.

Third and related to the above, the internal competition within firms and the relative weight given to regulatory uncertainty was further shaped by firms’ organizational identities. Firms which viewed themselves as “core pharmaceutical producers” were more inclined to perceive biotechnology as an inevitable scientific trend, and therefore to give lower weight to societal protest and to regulatory uncertainty in their investment decisions. By comparison, firms which conceptualized themselves as a “diversified business portfolio” were more inclined to forgo investment in biotechnology in favor of alternative projects with more secure financial returns. As a result, large and diversified firms were more likely to withdraw from the biotechnology market or to move too slowly, whereas smaller firms with a core pharmaceutical identity were more inclined to successfully launch new products.

Fourth, the authors illustrate the path dependent impact of firms’ response to social protests. Rather than withdraw from the biotechnology market, some firms chose to shift their production outside Germany or to states (Landers) with less vigorous social opposition and away from their headquarters. As a result, biotechnology teams were physically distanced from the corporate centre, resulting in project coordination problems and in their weaker political position within the firm.

So what is noteworthy about the above findings and conclusions? First, their significance lies in depicting the impact of societal pressure on firms not in terms of gradual normative internalization, as typically suggested by socio-legal scholars, but as a factor that penetrates firms’ commercial investment decisions. Second, they are important in highlighting corporations’ investment decision making as a political process, wherein external societal signals are framed in light of internal struggles over alternative projects. This portrayal diverges from a common tendency to depict corporations as coherent unitary actors. Third, the article shows how corporations’ varied identities mediate their relative openness to external pressures.